All Forum Posts by: Chris Mackinlay

Hello BP. Wanted to get some advice. Thank you so much for all the wisdom on this forum.

A.

Per my insurance, I have until Dec 25th to rent it or they inflate my rate.

The next week I will be traveling and my GC is taking the Thanksgiving holiday off.

That puts me at Dec 2.

The house should be rent ready by Dec 7th. Big projects are: carpet, windows, blinds, deep cleaning.

I’ve read multiple times about waiting until the house is completely rent ready before marketing, but I feel like I need to break that rule because of my rent deadline and the holiday season.

Would you recommend marketing it with or without pictures with how it currently sits with a description about the pending updates? (Remember, gross carpet and worn 1950’s windows) I plan to advertise it as ready on Dec 11.

B.

What makes a rental attractive during the holiday season? It’s a 3/2 house in a great location, but again, time crunch. I don’t want to fudge on qualifications: credit score, rental/eviction history, criminal background check, income.

Would it be to my advantage to incentivize by paying the first month’s utilities? I don’t want to do anything like “free rent for a month” because I think that trains the tenants that I am okay with less than the full rent amount.

C.

I’ll probably use Cozy to collect rent and receive monthly payments. What is great resource to run background checks?

As a practice, are all the repair costs deducted from the deposit and anything not used to return the property into pre-rent condition is refunded?

@Flash Alexander

Agreed on the CF number. Of you're cash flowing $200 after expenses, and the market drops a bit, you're not making money at that point.

@Elizabeth C.

Use the 1% rule as a screening guide.

If monthly rent is 1% of the purchase price, consider further.

This doesn't account for total money invested though, like closing costs, repairs, initial vacancy, all of which your W-2 pays for.

The more competition, the sharper you become.

I have it worked out already. I assume the terms of the private money that bought it for the previous investor, and I have my own private money to fund the rehab. Never considered this before, as I would have very little money of my own in the property ($20k). I'm asking specifically if private money from two different sources typically brings poor results. I just don't have the experience.

I am seeking coaching from some experienced Investors as well. 

A genuine "Thank you!" for your comment!

Erik, Lot of really good questions there. Thank you for taking the time!

All in cost: That is correct. 

Total rents: Correct.

Utilities: I've factored in some for common area electricity. Was planning to meter all the units, but I've received a lot of coaching that says to pay at least some, like you're saying. Do you have a recommendation on which ones? Trash is provided by the city, we have alleys in my area with dumpsters in them for use.

Contractor said approx $75k for repairs to the units. I'm mentally thinking more because that's been my experience in REI thus far.

Projected monthly income on $750/unit (I'm being pessimistic) is $978/month. That's factoring in 24% total for vacancy and repairs. 

Cost-overrun? I'm thinking this means if the rent is lower and repairs are higher than planned. I keep working. I don't want to pay to have a job, but worst case, I can support this property with my w2 given current loan terms. 

Hi BP.

I have an opportunity to buy 6 property complex. It's more like a small village. It's one property, but has 4 buildings on it. 

The current owner has it financed from private money. I can get into it for $20k and I'd take over the payments of ~$1450/month for the next 14 years. Then it'd be paid off for $263k, total cost to me. That includes principal and interest.

Most of the units are small studio apartments that would rent for $950/month. 

They are trashed. I walked the property with a contractor, it would cost me north of $75k to rehab all 6 units. I'm sure this will increase. All of the units will need extensive electrical, plumbing, sheetrock, fixtures, probably gas lines, some need masonry work, another has termite damage, two others have mold from failed siding, there is some roof repair to be done, tiling, basically everything. Like I said: LOT of work. The bonus here is I can set up separate meters for each unit. 

Problem is I don't have $75k laying around to fund this, so I'll be pursuing my own private money to make it happen.

Private money to hold the note, more private money to rehab it. Is this generally a stupid idea?

After all these repairs, the property should be worth at least $400k (I'll be clarifying this number some more tomorrow) and I'd like to explore a commercial loan. What is a general rule of thumb for loan terms so I can have a plan for a refinance?

Thank you for any input or experience!

@Jacob Tate

Probably not. If you rent it for $2000/month after a refinance, it would be like buying the house for investment purposes at $275k.

Violates the 1% rule of thumb by a lot.

Sure you could cover the mortgage and taxes, but you'd be losing money with every repair and vacancy.

Probably a better option to sell it. Also, there are costs in refinancing.

Would you do it if it was a 3/2 sfr for $150k?

I wouldn't do it. That's an awfully lot of capital for a relatively low gain. Maybe if you could get the tenants to pay the utilities that might be different.